Learning Path
Question & Answer1
Understand Question2
Review Options3
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Explore TopicChoose the Best Answer
A
Marginal analysis helps in determining the optimal level of production by comparing additional costs and benefits.
B
Marginal costs are always lower than average costs.
C
A decision is considered rational if the marginal benefit exceeds the marginal cost.
D
Marginal analysis is only applicable in short-term decision making.
E
Understanding marginal analysis can improve resource allocation and profitability.
Understanding the Answer
Let's break down why this is correct
Answer
Marginal analysis in economics is a method used to evaluate the additional benefits versus the additional costs of a decision. It helps individuals and businesses make choices by focusing on the impact of small changes, or "margins," rather than looking at total costs or benefits. For example, if a bakery considers making one more cake, it will assess whether the profit from selling that cake outweighs the cost of ingredients and labor. This approach is useful because it encourages decision-makers to think about how each small change affects their overall situation. Therefore, any statements that highlight the importance of comparing additional benefits to additional costs in decision-making are true regarding marginal analysis.
Detailed Explanation
Other options are incorrect because This statement is incorrect; This is a common misunderstanding.
Key Concepts
Marginal Analysis
Cost-Benefit Analysis
Resource Allocation
Topic
Marginal Analysis in Economics
Difficulty
easy level question
Cognitive Level
understand
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